Activity Based Funding for Hospitals: English Policy, International Experience

The material in this book is drawn from presentations and discussions at the conference "New Financial Flows for NHS Hospitals – Introducing Payment by Results in England: Some Lessons from Overseas" held at The Commonwealth Club, London, on 31st March 2004. The conference was jointly organised by the Office of Health Economics and the University of York Centre for Health Economics. This book is based on the conference held to examine the issues that are likely to result from paying NHS hospitals on a case-by-case basis. The intention of the conference was to draw lessons for England from the experience and economic research in the US andEuropean countries, where similar payment systems have already been introduced. The aim is to enable policy makers, NHS managers and academics in the field to consider these issues whilst the specifics of the English NHS payment by results system are still being developed, the hope being to help shape and influence improvements to the system and to determine priorities for future research to help the policy achieve its objectives. The English Department of Health’s key policy objectives for ‘payment by results’ are set out by Bob Dredge in the first chapter of this book, where some of the policy risks are also recognised. An advantage of being a late-adopter of this form of financial regime is that there is a wealth of international experience to build upon. In Chapter 2 Tom McGuire draws lessons from the US, which was at the forefront in introducing case mix based payments, about the incentive effects of different design specifications of the financial system. Egil Kjerstad, in Chapter 4, provides evidence from Norway showing the extent to which case payments can stimulate higher levels of activity. In Chapter 5, Miriam Wiley summarises the experience in Western Europe with using case mix to adjust hospital funding. Nigel Edwards suggests in Chapter 7 various ways in which NHS trusts and PCTs may react to the new policy. In Chapter 8 Andrew Street probes the likely consequences of the attempt to fix prices that is contained within the English ‘payment by results’ policy; and the final chapter presents the main points raised in the discussion of that policy at the seminar.